2024 (12) TMI 1545 - AT - Service Tax

Recovery of service tax with interest and penalty - Intellectual Property Service - royalty payments made by the appellant for receiving the technical know-how to their parent-company at USA - HELD THAT - The issue to be decided is whether the royalty payments made by the appellant for receiving the technical know-how to their parent-company at USA and consideration received from the domestic customers towards transfer of technical know-how are liable to service tax under the category of intellectual property service as defined under Section 65(55a) of the Finance Act 1994. This Tribunal recently in the case of GE BE PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX BANGALORE-I 2011 (8) TMI 1119 - CESTAT BANGALORE in a similar set of facts had set aside the demand of service tax in relation to technical know-how. Conclusion - The royalty payments and considerations did not constitute a taxable service under the Intellectual Property Service category. Appeal allowed.

Summary

The judgment from the Appellate Tribunal CESTAT Bangalore, presided over by Hon'ble Dr. D.M. Misra and Hon'ble Mrs. R. Bhagya Devi, addresses an appeal against Order-in-Original No. 62/2010 by the Commissioner of Service Tax, Bangalore. The appellant, engaged in manufacturing medical diagnostic equipment, was scrutinized for service tax liabilities under the Intellectual Property Rights Service category for royalty payments to a parent company in the USA and receipts from domestic customers for technical know-how transfer during 2005-2008. The original order confirmed a service tax demand of Rs.97,58,668/- with interest and penalties under Sections 77 and 78 of the Finance Act, 1994.The appellant argued that the transactions involved know-how transfer without any transfer of design, trademark, or patent, citing the precedent set in GE BE Pvt. Ltd. vs. CCE, which favored the appellant. The Tribunal, referencing this precedent, determined that the royalty payments and considerations did not constitute a taxable service under the Intellectual Property Service category. Consequently, the Tribunal set aside the impugned order, allowing the appeal with consequential relief as per law.